How the Final GOP Tax Bill Will Affect Real Estate Investors

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In a matter of seven weeks, the GOP has developed, amended, and reconciled a $1.456 trillion tax bill. On December 22, Donald Trump tweeted the tax bill into law.

If it feels like this all happened fast, it’s because it did. The Tax Reform Act of 1986, our country’s last major tax overhaul, took a little under two years to pass from start to finish.

This legislative history was promised to be aimed at the middle class. While I’m not going to dive into whether or not that promise was fulfilled, I can tell you this: real estate investors are major winners.

This article is not meant to be all encompassing. I have pulled out changes that I feel will impact the majority of BiggerPockets readers. So even though alimony rules have changed, this is the last time I’ll be mentioning it.

Make sure you bookmark this BiggerPockets Q&A thread where the bill is being discussed and strategies are being crafted.

Almost all of these changes begin on January 1, 2018, and revert in 2025.

What’s Changed

Tax Brackets

  • 10% Tax Bracket
    • MFJ: $0 – $19,050
    • Single: $0 – $9,525
  • 12% Tax Bracket
    • MFJ: $19,051 – $77,400
    • Single: $9,526 – $38,700
  • 22% Tax Bracket
    • MFJ: $77,401 – $165,000
    • Single: $38,701 – $82,500
  • 24% Tax Bracket
    • MFJ: $165,001 – $315,000
    • Single: $82,501 – $157,500
  • 32% Tax Bracket
    • MFJ: $315,001 – $400,000
    • Single: $157,501 – $200,000
  • 35% Tax Bracket
    • MFJ: $400,001 – $600,000
    • Single: $200,001 – $500,000
  • 37% Tax Bracket
    • MFJ: $600,000+
    • Single: $500,000+

Related: Key Changes in the Trump Tax Plan That Will Affect Real Estate Investors

Itemized Deductions

Mortgage interest is now only deductible on the first $750,000 of acquisition debt on primary and secondary residences. There is a grandfather clause that allows all previously purchased residences to continue deducting their interest on up to $1,000,000 of debt.

Interest on home equity debt is no longer deductible, unless the proceeds are used in a trade or business acquisition or to improve rentals. Home equity debt includes refinances on your primary or secondary residences as well as HELOCs.

State and local taxes are now limited to an aggregate $10,000 deduction. This includes state income and property taxes. Folks living in high-income, high-property-tax states, like California, New Jersey, and New York, will be negatively affected. If your state income tax is $12,000 and your state property tax is $8,000, you only get a maximum deduction of $10,000, even though your state and local taxes amount to $20,000 total.

Miscellaneous itemized deductions have been eliminated. This means that you can no longer deduct unreimbursed employee expenses and tax preparation fees (that are not allocated to prepping schedule C and E.

Medical expenses will be easier to claim as the 10% floor has been reduced to 7.5% of AGI. So if your AGI is $100,000, previously you had to incur at least $10,000 of medical expenses before they became deductible. Now you only have to incur $7,500.

Note: these deductions do not limit ability to claim expenses on rental property. These changes are related to your itemized deductions (Schedule A).

Standard Deduction and Personal Exemptions

The standard deduction will now be $12,000 for those filing single, and $24,000 for those who are married and filing joint. Personal exemptions have been eliminated.

Previously, a family of five would get a standard deduction of $12,700, and total personal exemptions of $20,250. Combined, this family received a total deduction of $32,950. Now their total deduction is only $24,000.

Child Tax Credit

To avoid mutiny from the above family of five above, the GOP has made changes to the child tax credit. The credit will increase from $1,000 to $2,000 per qualifying child. The refundable credit will increase to $1,400.

The income phase outs have increased to $200,000 if single and $400,000 if married filing joint.

529 Plans

If you’ve read my prior articles, you likely know my stance on 529 plans. With the passing of this bill, I dislike them a little less.

You can now use 529 plans to pay for private, public, and religious elementary and secondary schools, plus qualified education expenses.

Alternative Minimum Tax (AMT)

Unfortunately for high-income earners and their tax preparers, the AMT is still in existence. The good news is that the exemption amounts have increased to $109,400 for married filing joint and $70,300 for all other taxpayers. Additionally, the phaseout thresholds are increased to $1,000,000 for married taxpayers filing a joint return, and $500,000 for all other taxpayers (other than estates and trusts). These amounts are indexed for inflation.

Obamacare Penalty Eliminated

The penalty for not having health care has been eliminated beginning in 2019. Healthy millennials who don’t want/need health insurance are high-fiving. Their parents are upset that their premiums will likely increase in 2019.

Pass-Through Deduction

A new “freebie” deduction has been granted to sole proprietors, LLCs, and S corps generating qualified business income. If you are a partner in a business, you will receive the deduction based on your allocable ownership.

The deduction appears to be on an aggregated basis for rental properties but on a business-by-business basis for businesses.

The deduction is the the sum of:

  • The lesser of:
    • Combined Qualified Business Income, or
    • 20% of the excess of: the taxable income divided by the sum of any net capital gain
  • And the lesser of:
    • 20% of the aggregate amount of the qualified cooperative dividends of the taxpayer, or
    • taxable income reduced by the net capital gain

In order to figure the above, we must know what combined qualified business income is.

Combined qualified business income is the lesser of:

  • 20% of the qualified business income with respect to the qualified trade or business; or
  • The greater of:
    • 50% of the W-2 wages with respect to the qualified trade or business, or
    • The sum of 25% of the W-2 wages with respect to the qualified trade or business, plus 2.5% of the unadjusted basis immediately after acquisition of all qualified property

Let’s assume that you don’t have any capital gain or qualified cooperative dividends. We’ll also assume you own a rental property you purchased for $120,000, of which $100,000 was allocated to the building and $20,000 was allocated to the land. Furthermore, let’s assume that your rental property generated $5,000 in net taxable income after deprecation and amortization.

Your deduction calculation will be the lesser of:

  • 20% of the qualified business income ($1,000; figured by multiplying $5,000 by 20%); or
  • The greater of:
    • 50% of the W-2 wages ($0; you didn’t pay yourself W-2 wages); or
    • The sum of 25% of the W-2 wages ($0) plus 2.5% of the unadjusted basis immediately after acquisition of all qualified property ($2,500; figured by multiplying the unadjusted (unadjusted basis does not include land) basis of $100,000 by 2.5%).

In this example, your deduction will be the lesser of $1,000 or $2,500, so your deduction is $1,000.

This is a freebie deduction. All you have to do in order to claim it is make more money. It’s a deduction that’s figured after the calculation of your AGI though, so it’s being referred to as a “below the line” deduction.

There is another twist though. If your total taxable income is less than $157,500 (if single) or $315,000 (if married filing jointly), then you are excluded from the having to go through the wage and basis calculation. Instead, you will automatically qualify for a 20% deduction on your combined qualified business income.

Service businesses will not receive a deduction at all, unless the taxpayers who own the service businesses fall below the $157,500 (if single) and $315,000 (if married filing jointly). If they can accomplish this, then they too will qualify for the 20% deduction.

Per the new law, service businesses are “any trade or business where the principal asset is the reputation or skill,” except for engineers and architects.

I was sad when I read this because, you know, I run a service business. Maybe our lawmakers know that CPAs will game the system as much as possible, and they just wanted to make it harder for us.

C corporation Rates

If you own a C corporation, you will now see a flat tax of 21%. This is great for C corporations that have large amounts of net income. Generally though, the majority of BiggerPockets readers will not be directly affected.

Will you be indirectly affected via trickle down economics? Who knows.

Bonus Depreciation

The new law increases bonus depreciation from 50% to 100% for assets with useful lives of less than 20 years. What does that mean, exactly?

If you buy personal property (carpet, appliances, tools, equipment, etc) or if you make land improvements (landscaping, driveways, parking, etc) you can now immediately write off the entire cost of these assets.

You cannot write off the cost of buying a rental property and the property’s key components because they have useful lives of 27.5 years.

It is important to note that this is bonus depreciation. That means that when you sell the assets, you will pay depreciation recapture tax. Keep that in mind.

Bonus depreciation is retroactive to start in September 2017. So if you are making any year-end purchases/improvements, they will be 100% written off.

Lifetime Gift Exclusion

Every year, you are allowed to gift another person $14,000 without having to fill out a gift-tax form. If you gift any one person over $14,000, you must fill out a gift tax form that then reduces your lifetime gift exclusion.

That lifetime exclusion has been increased to $10,000,000 and will be indexed for inflation. This is on a per-person basis and will reduce the number of estates subject to federal estate taxes.

Rehabilitation Tax Credit

The rehabilitation tax credit has been reduced in scope.

1031 Exchanges

1031 exchanges allow you to exchange like-kind property and roll your gain forward without having to pay tax.

The new rules modified 1031 exchanges to include only real property. The intention was to eliminate exchanges of vehicles, planes, and equipment. But will it affect people who need to 1031 a building that has undergone a cost segregation study? After all, the point of a cost segregation study is to identify personal property assets.

Frankly, we’re not yet sure.

Domestic Production Activity Deduction (DPAD)

DPAD has been eliminated. This will negatively affect flippers, developers, and builders.

What Didn’t Change

Section 121 Exclusion

This is commonly referred to as the $250,000 ($500,000 if married) exclusion on gain from the sale of a qualified residence. In order to claim the exclusion, you must have lived in the property for the past two of five years.

Earlier renditions of this bill had proposed making the exclusion harder to claim. They had modified the rules to make you live in the property for the past five of eight years, and they included a phase-out for high income earners.

I’m happy to report that there was no change here. You can now sleep stress free.


The senate had proposed moving the useful life of both residential and commercial property to 25 years. This would have been a huge boon to owners of commercial property, as the useful life is currently 39 years.

But this did not make it in the final bill.

Rental income being subject to SE tax

In my previous article on the bill, I reported a three-sentence line in the House bill that would have made rental income subject to self-employment taxes of 15.3%. Luckily, the House admitted this was a “mistake” and removed the provision.

So rental income is still taxed as it is currently. No self-employment taxes.

What Should You Do Before Year-End?

Pre-Pay 2018 State Property Tax

Everyone should look at pre-paying their 2018 state property tax bill by the end of the year. If you are subject to AMT, you should factor that into your consideration as to whether or not you should pre-pay.

The reason we want to pre-pay state property tax bills is due to the $10,000 aggregate limit on all state and local taxes beginning in 2018. So we shift property taxes from 2018 into 2017 where we can deduct them.

This does not apply to state income taxes. There is a provision in the bill that specifically disallows pre-payment of 2018 state income taxes.

Pay Your Q4 2017 State Income Tax

Though we can’t pre-pay 2018 state income taxes, we can pay our Q4 2017 state income tax bill by the end of this year. Instead of waiting until April 15th, 2018 to pay your 2017 state income tax bill, cut a check to the state by the end of the year. That will allow you to deduct the taxes in 2017 as itemized deductions rather than deducting them in 2018, which will make them subject to the $10,000 aggregate limit.

Defer Income

Next year, you will most likely see tax savings. If you have control over your income, push revenue into January 2018.

Related: 7 Common Tax Mistakes New Real Estate Investors Make

Accelerate Expenses

Because you will most likely see tax savings next year, go ahead and pre-pay for expenses before the end of the year to reduce your 2017 tax bill. You can pre-pay for trips, conferences, membership dues, and subscriptions. You can also buy tools, equipment, and make repairs before the end of 2017. All of these acts will move more expenses into 2017 and will reduce your 2017 tax bill.

The caveat is that if you consistently have passive losses and cannot claim them due to the passive loss rules, pre-paying won’t help.

Closing Thoughts

This is a huge tax bill. Because it was pushed into law so quickly, there will be tons of loopholes to exposure. Our firm has already identified quite a few strategies that real estate investors can use. I’ll be writing about those strategies over the coming months, so stay tuned!

Disclaimer: This article does not constitute legal advice. As always, consult your CPA or accountant before implementing any tax strategies to ensure that these methods fit with your particular situation.

Do you have questions about how the new tax bill will affect your business? Ask me below!

About Author

Brandon Hall

Brandon Hall is a CPA and owner of The Real Estate CPA. Brandon assists investors with Tax Strategy through customized planning and Virtual Workshops. Brandon is an active real estate investor and a Principal at Naked Capital, a capital group investing in large multi-family projects and manufactured housing. Brandon's Big 4 and personal investing experiences allow him to provide unique advice to each of his clients.


  1. John Underwood

    Brandon, thanks for the great article.
    One question: Are state property taxes that are on schedule E for rental properties part of the 10k tax limit or are these property taxes considered a business expense and not part of this exclusion?
    If this is the case then only primary and secondary owners properties taxes fall under the 10k limit?
    I’m not sure which applies.
    Can you elaborate?

  2. Ryan Wilson

    I own many rentals in my LLC. They are in Texas where we have high property taxes. The property taxes for all of my rental properties far exceeds $10,000. If I am understanding you correctly, I will no longer be able to deduct property taxes over $10K for my rental properties?

  3. Cindy Larsen

    Thank you for helping us understand the effects of the new tax bill. One question i had is that you said the changes will revert in 2025. Does that mean in 2025 everything changes back to the 2017 tax rules?
    Would this include the new tax brackets?

    Also, could you please provide a link to the fInal form of the new tax bill? I file as head of household, and would like to look up what the new tax brackets are.

    Thank you very much.

    • Cindy Larsen

      Thanks, that answers another if my questions. I was concerned wemwould no,longermbe able to,deduct interest on rental properties.

      Do you know if HELOC interest on rental properties will still be deductable if the funds are, for example, used as a down payment on another rental property?

        • E. Barret

          I know I shouldn’t rely too heavily on IRS pubs… but Pub 936 lead me to believe home equity interest was not necessarily allocated the same way as the loan proceeds. (This was repeated in Pub 535, bottom center ‘tip’ on page 4.) In my case, a rental was purchased with an equity loan secured by my personal residence. Can all interest be expensed on Sch E? It will be lost if limited to Sch A as I wont be itemizing.

          What have others commonly done in this scenario?

          Many thanks for such an illuminating article Brandon Hall, you’re an asset to the community here! Happy New Year!

        • Joan Weng

          I face the similar issue. Bought a rental property with a HELOC on my primary residence. Can the Primary HELOC interest continue be deducted on schedule E? Thanks!

  4. Thanks Brandon! Good article, I can’t understand how some of the former posters have difficulty reading or understanding that taxes on rentals simply won’t change, hell it’s a business expense!

    • Darin Anderson

      It might seem a little funny, but this bill did actually limit legitimate business interest deductions for business with more than 25 million in gross receipts to 30% of earnings (not revenue, earnings. I find it ridiculous that a business may not be able to deduct all of their business interest expenses but that made it into this bill.

      • Deanna Opgenort

        30% of earnings paid in interest is a LOT. Maybe at that point the IRS figures the large business is laundering it’s profits by paying “interest” to an offshore shell company?
        ie Company A earns 10 million profit on 100M of revenue. For their various business expenses they borrow $40M from “The Vanatu Special and Proprietary Bank, LTD” paying 25% interest, and *POOF*, no taxable income.
        Shareholders of Vanatu, LTD would of course just HAPPEN to be the owners of Company A…

  5. michael dworman

    Since the deduction is based on the unadjusted basis, if we have owned property for several years, do we get the deduction on what we originally paid for the property? or does this deduction only apply to new acquisitions? If we own interests in several LLCs, the calculations could be quite complex. It seems that the managing members would have to provide this information to the investors? It seems that the IRS will have to develop new forms to track this information. Perhaps a new disclosure on K-1s? Under the new depreciation rules, would rewiring the electrical qualify for the 100% bonus depreciation?

  6. Julie Wilhelmi

    Great article! So I am an employee in the health professions. If I need to take classes that relate to my employment that I usually take as a deduction on my taxes ( form 2106) are you are saying that that deduction is going to be eliminated in 2018 and it would be better to pay for it now?

  7. Jon Tudor

    Your original article where SE taxes might be applied to real estate was a horrible thing to see. It came on my birthday and was definitely not the kind of present I was looking for. I know it was listed as a mistake shortly thereafter but still very comforting to see the final bill not contain this at all.

    On a related but humurous note. During my time of crisis (thinking that SE tax to applied to real estate could actually become true following the first article) a financial advisor reached out to me to try and get my business. I don’t normally entertain these type of requests but I figured why not ask a direct question and see they could actually help so I asked them, “Do you know if SE tax will be applied to real estate investment as part of the new tax bill?”….. During the follow-up conversation the advisor informed me he had an article from a site called Bigger Pockets to which I responded, “Written by Brandon Hall?”….. Needless to say I did not continue with the advisor.

    Brandon – Thank you for the continued analysis and details around real estate and taxes, it is truly helpful.

  8. John Murray

    Brandon lay those loop holes down brother. We all want to know how to maximize profit, lessen the tax burden and whip the IRS into submission. The New Tax Act was the fastest legislation to be ramrodded down the upper middle classes’ throats. I can hear the bitching from New York and I live in Oregon. All my income is either portfolio or passive. My CPA is sharpening the pencil and I can smell that sweetness passing through to another income stream. Ain’t that America!

  9. Hi Brandon,

    How exactly do we know “Pay Your Q4 2017 State Income Tax”? I thought as part of our paycheck the State Income Tax are withhold already,

    How exactly can we prepay for this “Pay Your Q4 2017 State Income Tax” to save some tax ?

    Thank you

    • Hi

      Regards to “Bonus Depreciation” you have mentioned:

      If you buy personal property (carpet, appliances, tools, equipment, etc) or if you make land improvements (landscaping, driveways, parking, etc) you can now immediately write off the entire cost of these assets

      These only apply to Business or Investment/Rental Property right?

      Am I correct If I only have one personal resident, those does not help.


    • Hiren Shah

      If one spouse is self employed and another is on W-2, Most people would increased withheld from W-2 and that covers self employed. I am in that situation and thinking to pay california estimated state tax. For example, Today when I pay $2000 if that comes back as return(over payment possibility) from California state when I file return in April, It will go in income of 2018. This will still help me because next year effective rate will be anyway lower. Last minute thought while reading this …

      Anyone please confirm this strategy.

    • Deanna Opgenort

      (not a CPA, not offering tax advice, etc)
      W-2 wage earners do indeed have their state taxes deducted from each pay check as they go along.
      Q4 refers to paying estimated taxes. Self-employed and businesses don’t usually have a regular pay check to have taxes withheld from, so the IRS wants us to give them 1/4 of our approximate expected (estimated) tax bill each quarter. They just don’t trust us to save it all up & hand it over to them on April 15 I guess.

    • Hiren Shah

      I think it will be fully depreciate but remember your long term strategy. You pay the tax on all depreciation when you sale the property. So if you think your current effective rate is lower than future rate when you plan to sale your investment property then you should not depreciate it. Tax strategy is requires long term thinking. I am new in this world but thanks to Brandon for this blog, I learn a lot to apply my own situation.

  10. Denise Brown-Puryear

    Thanks Brandon. This was quite helpful as I am planning our 2018 acquisition, rehab, rental and refinancing strategy; especially regarding equity loans used for business and/or real estate investing.

    I truly look forward to additional information on the new tax code that can further help us as real estate investors. Again, thank you!

  11. Ray Slack

    So Just to be clear.. Owning several rental properties in my personal name I can get the 20% QBI deduction even though my rentals are passive income rentals. Meaning can I get the 20% deduction AND still not have to pay SE tax on my rental income?

  12. Nicholas Krolicki

    Brandon thanks for the article. It was very informative. I have a question about the HELOC portion. I have a rental property with a first lien HELOC. The above doesn’t differentiate between a first or second lien position, so it sounds like it may not be deductible any more. Any insight as to if that is the case?

  13. Hiren Shah

    What are the changes for people who want to move to new purchase and convert current resident as rental property? Is there any pros and cons for this strategy?

    One strategy I thought is that person should borrow as much as from current mortgage before moving to new home and get less loan on new primary home. Get low rate for current home as primary and then move to new primary home.

    Basically, new tax low suggest to use high standard deduction and avoid keeping loan on primary home and keep loans on investment only.

    Any thoughts?

    • Janine Badic

      I just did something similar to what you suggested….I borrowed from my investment property’s equity to pay “cash” for my primary residence, and plan to take out a HELOC on my new residence to use for investment property purchases only. As far as I know, all the interest expenses are still on the business side of the equation.

  14. Russ Olivier

    Excellent article, thank you Brandon! Quick question … in order to take advantage of the new 20% QBI deduction, do investors have to file as a business entity if they currently simply file their rentals as disregarded entities on their personal returns? Thanks for any thoughts on this!

  15. Gee, as if property operators don’t already spend enough time documenting, strategizing, 1/4ly calculations and payments and tax returns over an inch thick. I’m glad for the would-be tax relief, but at what cost / associated “brain damage”?? Who comes up with this stuff / these provisions anyway?? ….you sure have to think they aren’t business people!! In a perfect universe, if the swamp got drained, please put these bureaucrats in line for the first “flush”!!

  16. Vinh Le

    Thanks for the update Brandon. I do have a question regarding property taxes. Does the maximum deduction of $10,000 for both state and local taxes apply only to your primary residence or is that also including if you have rental properties?

  17. Maarten Wagener

    From The Washington Post Please Note:
    Capital gains exclusion: Home sellers can exclude up to $500,000 for joint filers or $250,000 for single filers for capital gains when selling a primary home as long as the homeowner has lived in the residence for two of the past five years. An earlier proposal would have increased that requirement to five out of the last eight years but it was struck down.

    Seems to me that the IRC Section 121 remains unaffected……

  18. NA Mitchell

    Given the title of this article and some of the comments, I would add these points:

    1. There are several important real estate rules that are not addressed in the article, such as:

    a. The increase in and additions to Sec. 179 for roofs, HVACs, etc.,
    b. The new 10 year property and changes to qualified improvement property,
    c. The excess loss limitation for nonpassive businesses,
    d. The change to ADS recovery period and exclusion for foreign property, and
    e. The limitation on business interest deduction, the election, and use of ADS (particularly for real estate investors who cannot use the cash method because they have an LLC).
    f. Removing personal property from Sec. 1031.
    g. The longer period of time for the rehab credit.

    2. That the 20% flow through deduction is limited to business income. The new law doesn’t define that term and it isn’t clear if the law will adopt the Sec. 162/212 definitions. If it does, that might mean that most real estate investors don’t get the deduction; only those who currently qualify as real estate professionals under the PAL rules might qualify for this deduction. That is a guess. We won’t know until the regs come out.

    Whether the deduction applies on a grouped basis is also absent from the new rules (and allowing grouping would seem inconsistent with the material participation rules as that is an election, which is something different in our tax laws).

    The 2.5% of the unadjusted basis of all qualified property isn’t mentioned in this article….

    3. That the C corp. rates will impact many readers, even if it is just their C corp. management companies. We are all waiting to see the regs for clarity here–particularly on tiered entities.

    • Brandon Hall

      Thanks for adding your comments. Keep in mind who the readers of this article are. It doesn’t make sense to address every aspect of this bill for BP.

      For example, you mentioned the Sec 179 expansion for roofs and HVACs but what you failed to mention is that it’s for non-residential property only. While BP readers do own non-residential property, they are in the minority.

      I did mention the 2.5% of unadjusted basis. Not sure why that was missed in your reading.

      The business interest limition has an exception for businesses that are not generating $25MM per year. Again, few folks on BP and reading this article will hit those numbers.

      The C-Corp refs will not impact many readers. They will impact a minority of readers. Hopefully no one ones rentals in a C-Corp and this is related only to active businesses that they intend to one day sell or management companies.

      I liked all of your other points!

    • NA Mitchell

      No problem. I had two different clients send me the article. One of them is a mom-and-pop real estate owner but the other is not, so the reach of this website must be pretty far. I think the title of the article threw them off. I just hoped to note these other rules exist just in case there are other readers who are wondering (I see a few in the comments already).

      For what it is worth, I would also think that even the smaller investors will care about the business interest deduction. It is often one of the largest deductions for real estate owners. The $25M exemption will not apply for many (i.e., they have a multi-member LLC with 35%+ of losses allocated to LPs or limited entrepreneurs, so no cash basis as required under this rule).

      • Brandon Hall

        Interesting, I didn’t know it had such reach. I’ll keep that in mind in the future.

        I saw exceptions to the new Sec 163(j) (business interest) limitations to include (1) the $25MM gross receipts per taxpayer and (2) an electing real property business.

        On #2, quite a few CPAs and tax analysts seem to think that means all rental business (i.e syndicates) are excepted from the limitations.

        What are your thoughts on that?

  19. Drew Kessler

    Brandon, for the Bonus Depreciation…can it be an “improvement”? If you are rehabbing a property you just purchased and buying new appliances, you can now write those off immediately? And I assume you still have to have the property “in service” to do so?

  20. Christopher Smith

    From an article I just pulled up on the web this seems to specifically include:

    1) Rental Income taken directly from Schedule E (i.e., apparently no specific legal entity is required – it would be really great if we could get absolute confirmation this includes what now are considered passive rental real estate properties).
    2) REIT Dividends
    3) Qualified Publicly Traded Partnership Income

  21. Kari Koszdin

    Thanks for the article. I had read that owners of service businesses will not be eligible for the 20% deduction of business income, but your article suggests otherwise. I”d like to find this out for sure!
    What if you are depreciating improvements that were made in previous years? Can you just depreciate the rest of the amount next year if the property qualifies?

  22. KAMESHA S.

    Good Morning All, Happy New Year!

    Thanks for this great article Brandon! It was very informative!

    Getting into the Flipping Business and building a portfolio of Rental Properties over time has been a long standing goal of mine. In preparation, I have read several books, every blog post I can find and listened to every Webinar and Podcasts on BP in addition to some courses college courses on real estate and the business of investing. I planned to take Brandon Turners advise pertaining to avoiding analyzing paralysis and do my first flip this month.

    But, I must say that I am a very concerned about this Tax Bill as a newbie to REI starting out as a flipper in the great state of New Jersey, with the elimination of the “Domestic Production Activity Deduction (DPAD)”.
    I am very interested to know specifically how this bill will affect flippers in general and especially in New Jersey, which is one of the top 3 states most adversely impacted by this Bill.

    I would so appreciate your feedback on this concern in future comments and follow up articles. Thanks!

  23. Soh Tanaka

    Bonus depreciation only applies to the properties that placed in service, correct? In other words, you can’t take advantage of the bonus depreciation for appliances/carpet etc., if you buy a rental house and rehabbing it, until you put it in service.

    Thanks in advance for clarifying it.

  24. shawn devooght on

    so i have about 50,000 in property taxes on my rentals, is there any reason to pay in 2017 other than normal reasoning as to defer taxes? am i understanding correctly that there is nothing new here that makes u want to pay your taxes before year end?

    • Christopher Smith

      No entity required per everything I have seen (including articles by several law firms), however there still appears to be some residual uncertainty as to whether “Qualified Business Income” specifically includes what are Passive Rental Real Estate activities under IRC 469.

  25. John Spinola

    I was considering doing cost segregation on a commercial building I just purchased. As i understand it the cost segregated items are now considered personal property which is why I can write them off so quickly. My question is that if they are personal property and the new tax law says that I can only (1031) exchange Real Estate does this mean that I would not be able to exchange the value of these items going forward? Would my basis be only the value of the Real Estate even though i may have fully depreciated the personal property?

    Thanks for the article

  26. Tim Schroeder

    Are the property taxes on unimproved land considered an investment expense and thus deductible on Schedule E and NOT subject to the $10,000 limit, or is the land considered a personal asset and thus only deductible on Schedule A as an expense in which case it WOULD be subject to the $10,000 limit? I have seen conflicting indications on the internet, and nothing definitive.

  27. Justin Dalton

    Fantastic article and extremely informative. Thank you for the synopsis.

    I did hear there were changes to the expensing of business meals and entertainment from 100% deductible to 50% deductible. To your knowledge is there any validity to that claim?

  28. Yinan Q.

    Great article! Thank you so much, Brandon.

    I have a question for you. I am buying a fixer as my primary residence. The house is in such a condition that we cannot get a conventional mortgage. The seller agreed to seller finance for one year. My plan is to fix it up and refinance with a conventional loan and pay off the seller finance part.

    Based on your article, it looks like I cannot get mortgage interested deduction after refi as it no longer applies to refi of primary residence. Is my understanding correct? Is there any way around it?


  29. Kimberly Storey on

    Hi Brandon,
    I’m a real estate agent and my husband owns his own business (customer service call center business). Combined our net income is about $225k. Does this mean we will qualify for the 20% deduction for the service business noted?

  30. Joan Weng

    Very informative and useful summary. Thanks Brandon! Have a question on home equity debt. We used HELOC on primary residence to purchased a rental investment property in another state. With Interest on home equity debt no longer deductible, can we continue deduct the interest expense on schedule E for the rental property as it’s still part of the expenses? Thanks so much!

  31. Hi JOAN WENG,
    The extra charges of a government on the purchasing of property in the form of general country tax can be eliminate easily with in a seven days according to the rules and regulations of a government,If you write an application with the authentic reasons for a elimination of property tax and also attached a legal documents of a property tax pairs after that submitted in the government office by the tax layers which is helpful for you to approved the claim of your property tax in the seven days without any allegations of a government on the application of your property tax ,Remember don’t write any irreverent reasons in the applications of property tax you want to submit in the office of government and also don’t attached any illegal or extra document of property which increase the chances to refuse or neglect your claim application ,So keep it in your mind all the instructions and requirements given to you by the tax layer after concerning this kind of matter according to the current policy of government .

  32. I am about to sell some rental property and the proceeds of the sale will be about $48k. If I take that money and use it as a down payment to refinance the house I live in, and then take cash out as part of the refinance, will that alleviate some or all of the tax burden from the sale of the rental property?

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